Analysis: Malaysia announces sweeping energy reforms to meet Paris climate commitments

Government targets a tenfold increase in renewables’ share of energy mix

The newly elected government of Malaysia has affirmed its commitment to reduce carbon emissions by 45% from 2005 levels by 2030, in compliance with the 2015 Paris climate agreement.

All in all, it presents a case study in how one country is trying to meet its obligations under Paris.

To accomplish this, the country’s Ministry of Energy, Science, Technology, Environment and Climate Change (MESTECC) has announced forthcoming legislation on energy efficiency, due mid-2019, and a number of related measures to boost the take up of renewable energy.

These include a higher rate for energy buyback, a new “solar leasing” programme and an upcoming auction of large-scale solar photovoltaic (PV) projects.

The measures were announced after the MESTECC Minister Yeo Bee Yin said the government aims to grow the share of renewables in the overall energy mix to 20% from the current 2%.

Yeo said in parliament that the government would offer a higher price of MYR 0.50 (€0.10) per kWh for excess solar power sold back to the grid, equal to the national electricity tariff, from January 1 next year.

She said that the low sale price under the current buyback scheme, currently at MYR 0.31 per kWH, was responsible for the scheme’s dismal performance, currently at 3% of total utilisation as of October this year.

To allow consumers to take advantage of the higher prices, a “solar leasing” programme would also be introduced.

She said: “With this policy, users can enjoy zero upfront cost to install photovoltaic (PV) panels, and payment for the monthly leasing fee or solar energy usage can be made to the solar company involved via TNB (monthly electricity) bills.”

According to the minister, the cost of PV panels has fallen by 80% since 2009 and solar energy is fast approaching grid parity.

At grid parity, the cost of generating power from an alternative energy source is equal to or below the purchase price of power from the grid.

The minister has also reportedly announced the government’s intention to open a request for proposals to develop large-scale solar (LSS) projects to encourage solar power generation.

The call for bids to develop LSS projects would be the third in a programme initially launched in 2016 by the previous government, and is expected to be made by January 2019.Speaking to RI, Yeo said that government is looking at the use of Energy savings Performance Contracts (EPCs), an alternative financing mechanism which precludes the need for up-front expenditure to enhance energy efficiency within public sector buildings.

Under this model, Energy Services Companies (ESCOs) will design and arrange funding for a project guaranteed to generate cost savings sufficient to finance itself.

The savings gained from the improved efficiency is then used to pay the ESCO for the project, and additional savings will accrue to the relevant government agency.

With the recently announced raft of measures, Yeo told RI that the government hopes to send “an unequivocal message” to investors that it is committing to a “a decisive transition to a low-emission economy that is increasingly decoupled from greenhouse gas emissions”.

This was echoed at a recent townhall-style event with Prime Minister Mahathir Mohamad in London.

Mohamad told RI that Malaysia would continue to support foreign and domestic investment in renewable sources of energy including wind, solar and hydro.

Climate considerations were a key feature of the government’s election manifesto, which promised to grow renewable energy from 2% of the country’s energy mix to 20%, a 40% reduction of carbon emissions by 2020 and a commitment to reduce dependence on coal-fired power plants.

Separately, the government agency responsible for the development of renewable energy has announced the signing of three Memoranda of Understandings (MoUs) with the Asian Development Bank (ADB), the Japanese Business Alliance for Smart Energy Worldwide (JASE-W) and APX Inc.

Through the MoUs, ADB will provide three energy experts to evaluate Malaysia’s Renewable Energy Transition Roadmap (RETR), a plan to transition to a low carbon economy by 2035; while JASE-W will assist with developing energy efficient building concepts and APX will establish a renewable energy certificate (REC) trading marketplace.

Yeo has also launched a program to rate the energy efficiency of government buildings which will involve 50 buildings and is set to be implemented by the end of the year.

The labels rate a building’s energy efficiency on a scale of one to five stars and is aimed at encouraging the adoption of energy efficient measures.